BCE Investors Await Debt Marketing - RBC Analyst

As the market continues to free-fall, investors are keeping their eyes on BCE Inc. (BCE). The telecom giant’s massive buyout is scheduled to close on or before December 11 and it reports third quarter results on October 29.

It appears that BCE is preparing investor materials for its debt marketing, which should start shortly after its results are released, RBC Capital Markets analyst Jonathan Allen told clients. He noted that the banking consortium is entitled to a pre-marketing period of 15 days to talk with investors, then a formal 20-day marketing period.

Both equity and credit investors are eagerly awaiting the offering memorandum, which Mr. Allen noted is the first meaningful information on the definitive credit agreement between the lenders and the private equity consortium.

The stock has risen roughly C$4 since hitting an intra-day low of C$31.13 last week and continues to trade at a roughly 20% discount to the C$42.75 offer price. This is a result of fears that the banks involved won’t be able to fund the deal and it won’t close.

Mr. Allen is not permitted to comment on the likelihood of the deal closing, but he revised his fundamental net asset value target for BCE in the event it doesn’t, from C$30 per share to C$22. At 4.4 times 2009 estimated EV/EBITDA, the stock would trade at comparable levels to rival Telus Corp. (TU) and U.S. regional Bell operating companies. However, his price target remains at C$42.75.

As for BCE’s quarterly results, RBC lowered its earnings estimate from C$0.58 per share to C$0.54 higher-than-expected advertising costs related to the company’s re-branding efforts and lower net wireless additions.